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What will fuel the auto sector in the next ten years? October 2014 Jorge Sicilia Group BBVA Chief Economist.

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Presentation on theme: "What will fuel the auto sector in the next ten years? October 2014 Jorge Sicilia Group BBVA Chief Economist."— Presentation transcript:

1 What will fuel the auto sector in the next ten years? October 2014 Jorge Sicilia Group BBVA Chief Economist

2 The future of the auto industry in the next 10 years lies in responding to the new sociodemographic needs and focusing on growth in the emerging countries

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4 Demographics will determine buying patterns Long-term dynamics 4 Urban population to double and reach almost 4 billion by 2025, leading global activity As population matures and ages, young people are no longer predominant 2.5 billion new middle-class between 2000 and 2025, up to 60% of total population

5 The composition of populations are changing Long-term dynamics 5 G7ChinaLatin America Source: UN

6 Over 50% of the world’s population will live in urban areas Long-term dynamics 6 “EAGLEs Economic Outlook. Annual report 2013”, March 2013 Source: UN

7 By 2025 there will be 37 megacities, most of them in Asia Long-term dynamics 7 Source: UN

8 The “axis” of the world is changing Long-term dynamics 8 Source: BBVA Research, IMF/WEO

9 The middle classes are becoming predominant in emerging countries Long-term dynamics 9 Source: BBVA Research, World Bank, UN Population (millions)Population (%)

10 Car ownership and economic development: current situation Long-term dynamics 10 Source: BBVA Research, World Bank, UN Mexico Spain Portugal Colombia Peru Turkey China Car fleet per 1,000population) Long-term real PPP-adjusted GDP per capita (thousands)

11 Long-term dynamics 11 f: forecast Source: BBVA Research Car ownership and economic development: in the next 10 years

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13 The current crisis has hit developed countries hard Short-term dynamics 13 Source: BBVA Research, IMF, World Bank 80s-90s Current crisis Countries below the highest level of income Highest-income countries Long-livedNot ended GDP per capita decrease

14 Each country is exiting the crisis differently Short-term dynamics 14 Source: BBVA Research, World Bank, IMF and Angus Maddison Economic growth (cyclical comparison) TurkeyMexicoUnited States GDP per capita level

15 15 Trade protectionism unlikely on potential counterproductive effects (automobile) Index of the number of production stages for transport equipment by country (2009) Source: OECD

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17 Findings and lessons from income transition in the countries Challenges for the industry 17 Diversification, sophistication, complexity, innovation, welfare systems Low income Tertiarisation, manufacturing diversification and sophistication, increasing middle classes, financial deepening Middle incomeHigh income Demographics, urbanisation, high investment returns, low wages in basic manufacturing Macro and institutional, social unrest, poverty, basic services, increasing inequality Drivers Risks Factor accumulation moderates, wages rise, need for higher education, technological skills and infrastructure Population aging, fiscal sustainability, increasing inequality, excessive leverage Poverty trap Middle- income trap

18 Keeping younger customers; increasing older ones Challenges for the industry 18 Spain: distribution of vehicle-purchasing households by age of the head of the family (2013) Source: BBVA Research based on INE

19 What do new consumers want? Challenges for the industry 19 Survey: composition of car purchasers by age group (%, China) Source: Media reports citing Autohome.com.cn survey

20 Environmental issues Challenges for the industry 20 Alternative fuel stations in the US Source: Alternative Fuels Data Center (AFDC)

21 More than mechanical sophistication Challenges for the industry 21 Aging: mobility Technology: the car as an intelligent system Sustainability: alternative fuels Millennials: commting & connectivity

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23 Conclusions 23 Relevance of the automotive sector: competitiveness Demographics are key to the evolution of the industry The expansion of the middle class in emerging countries will result in an explosion in the sector Technology as a environmental challenge

24 24 In the next 10 years, the industry needs to focus on the emerging countries, given the expansion of the middle classes and their development into more urban societies; it faces challenges in technology, the environment and changing tastes

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26 BBVA Research 26 A staff of over 100 Emerging economies Developed economies Financial systems and regulation Global scenarios Divided into four main areas: More than 2,000 reports per year www.bbvaresearch.com

27 27 Analyze the world’s principal geographic areas and their key economic activities Economics Industries Geostrategic Financial

28 28 DISCLAIMER This document has been prepared by BBVA Research Department, it is provided for information purposes only and expresses data, opinions or estimations regarding the date of issue of the report, prepared by BBVA or obtained from or based on sources we consider to be reliable, and have not been independently verified by BBVA. Therefore, BBVA offers no warranty, either express or implicit, regarding its accuracy, integrity or correctness. Estimations this document may contain have been undertaken according to generally accepted methodologies and should be considered as forecasts or projections. Results obtained in the past, either positive or negative, are no guarantee of future performance. This document and its contents are subject to changes without prior notice depending on variables such as the economic context or market fluctuations. BBVA is not responsible for updating these contents or for giving notice of such changes. BBVA accepts no liability for any loss, direct or indirect, that may result from the use of this document or its contents. This document and its contents do not constitute an offer, invitation or solicitation to purchase, divest or enter into any interest in financial assets or instruments. Neither shall this document nor its contents form the basis of any contract, commitment or decision of any kind. In regard to investment in financial assets related to economic variables this document may cover, readers should be aware that under no circumstances should they base their investment decisions in the information contained in this document. Those persons or entities offering investment products to these potential investors are legally required to provide the information needed for them to take an appropriate investment decision. The content of this document is protected by intellectual property laws. It is forbidden its reproduction, transformation, distribution, public communication, making available, extraction, reuse, forwarding or use of any nature by any means or process, except in cases where it is legally permitted or expressly authorized by BBVA.


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